GHMC gets Rs. 26 Cr Central incentive for raising Municipal Bonds

Hyderabad: The Central Government has praised the efforts made by the GHMC on the bond issuance and as a token of encouragement, it has accorded an incentive of Rs. 26 crores to the GHMC for the bonds which have been raised for Rs. 200 crores in the first phase.

It has also been decided that the Government of India make efforts to the ULBs to come forward for taking part in the issuance of the bonds with which they will also be provided with the incentive on the same lines.

Hyderabad is the 6th most populous urban agglomeration in India and with the largest population in the state of Telangana, which itself is amongst the most urbanized states of India. It is also the highest contributor to the GDP of the Telangana State. This has resulted in huge influx of people from across the country into the city, thus resulting in highly congested roads, resulting in huge traffic jams, also leading to increase in the pollution levels.

Under the guidance of Chief Minister K.Chandrashekhar Rao, the GHMC undertook the task of Strategic Road Development Project which would result in hassle free travel, less travel time, lesser fuel consumption and better pollution management.

In order to part finance this project, the political and administrative leadership of Telangana decided to adopt the route suggested by Prime Minister Narender Modi, wherein he had dreamt and suggested that at least 10 municipal corporation would be raising funds through the bond market in FY 2017-2018. The GHMC started the process of floating the municipal bonds last year and with better financial management, it also got its credit rating improved from AA Negative Outlook to AA Stable Outlook.

On 14th February this year, the GHMC finally entered the bond market through the EBP System of BSE Ltd. for Rs. 200 Crore Bond Issue with tenure of 10 years and Credit Rating of AA Stable from CARE and India Ratings. The issue got overwhelming response from the capital market investors, securing over 200% subscription but GHMC decided to retain only Rs. 200 Crores at a coupon rate of 8.90%.

The GHMC also plans to raise another Rs. 800 Crores through the bond market in the next financial year, timing to depend upon the prevailing market conditions. It may be noted that this the second municipal bond floated in recent times after Pune Municipal Corporation raised bonds of 200cr in June 2017. Further, in the last 50-60 years, the municipal and other local civic bodies have managed to raise Rs. 2,000 crores approximately. Hence GHMC now accounts for almost 10% market share in this field. Therefore, the success of this issue is a considered as historic and a watershed moment in the financial governance of the local bodies. It can serve not only as a trigger for enhancing the municipal bond market in the country but also promote financial prudence and discipline due to oversight mechanisms put in place by the SEBI.